21 May 2021
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European respondents are committed to prioritising ESG as a tool for investment and indicate an increasing shift towards alternative investing
- Most dominant theme for investors in 2021: The pandemic, the move to alternatives, ESG integration
- 700 global institutional investors and consultants surveyed, including 320 based in EMEA
- Investors continue to expand alternative investments while facing barriers such as complexity of deals, investment limits and liquidity provisions
- 25% of EMEA respondents believe that ESG investing is a trend rather than a core long-term strategy, although 68% are prioritising it as a tool for investment
According to Nuveen’s inaugural global institutional investor survey, the ongoing global pandemic, the shift to investing in alternatives and ESG integration are among the most powerful themes shaping investment decisions across Europe in 2021. Of those surveyed, 54% of respondents believed the pandemic would be the greatest driver of change to asset allocation and investment strategy in the coming year. 55% also indicated that they planned a strategic shift away from public markets to private markets in 2021 and 73% believed that increasing active engagement with companies they invest in was the most important way to influence ESG factors.
“With simultaneous crises in global public health as well as economies and markets worldwide, 2020 offered us an extraordinary opportunity to assess the practices and attitudes of major institutional investors in managing both portfolios and day-to-day operations,” said Alex Prout, Head of Nuveen Global Client Relationships and Head of Distribution Europe.
Perhaps unsurprisingly the pandemic was a strong driver shaping investment decisions for the year ahead, but additionally respondents in EMEA point to alternatives and ESG as playing a significant role in their portfolio construction in 2021.”
The study surveyed 700 global investors and consultants spanning North America, , and the Asia Pacific region in October and November 2020. All survey respondents represent organizations with at least US$500 million in assets. 320 institutional investors in EMEA were surveyed.
The research shows that despite the consensus on themes significant barriers still remain, with 68% of investors across Europe pointing to the complexity of deals, and 65% and 56% respectively responding that investment limits and liquidity provisions are the greatest barriers. Meanwhile, when it comes to ESG, 76% of respondents agreed it is about fully integrating material ESG factors into investment decision-making. However, only 45% believe that ESG factors are valid drivers of alpha and 25% responded that they considered ESG a trend rather than a core, long-term investment strategy.
“More and more, market research is helping make the case that ‘responsible investing’ can deliver competitive returns, but clearly there is a need to put more effort into validating the investment proposition along with the positive impact,” said Amy O’Brien, Global Head of Responsible Investing. “The marketplace would benefit from more attention and focused effort on helping prospective ESG investors resolve concerns and clarify objectives for their stakeholders and themselves.”
Despite some of the clear challenges those surveyed expressed about investing in alternatives and ESG integration, their responses also indicated that their organisations have clear strategies for tackling these areas.
For instance, 70% of respondents in EMEA said they were likely to expand their internal team, such as hiring, education, etc. to overcome the challenge of investing in alternatives, and 62% are seeking new strategic partnerships for co-investment.
Similarly, when it comes to ESG, respondents are committed to problem solving, with 68% said they would prioritise ESG as a tool for positive impact (e.g. sustainability, social good, etc.).
Alex continues: “Whether navigating the challenges of a global pandemic, developing new approaches to alternatives amid a strategic shift to private markets or turning ESG desires into reality, asset owners and consultants are navigating complex, high-stakes decisions that are defining the future of investing.
“This survey has allowed us to explore these critical topics in order to help us better understand the beliefs and mindsets that are leading to action in each of these topics and to better help our clients achieve their goals with clarity and conviction.”
Responsible investing incorporates Environmental Social Governance (ESG) factors that may affect exposure to issuers, sectors, industries, limiting the type and number of investment opportunities available, which could result in excluding investments that perform well.